Why mobile banking would be unthinkable without satellites


Many people use smart phones to handle their banking business. This is quick, convenient and reliable. Dr. Fritz Merkle, a member of the Management Board of aviation and space company OHB SE, explains the role played by satellites and why the modern financial system is dependent on them.


Dr. Merkle, what have satellites got to do with mobile banking?

The Galileo satellites that we are building at OHB are normally referred to as navigation satellites. However, in the United States they are called precision navigation and timing satellites. This is because time is just as important as navigation. Navigation is made possible through this precision timing system.

What role does timing play with navigation?

To determine a position, I require three physical measurements. These could be three different times for example. Every satellite is fitted with a high-precision atomic clock. Satellites are located at precisely known positions and emit a time signal at exactly the same time. This time signal spreads out at the speed of light, i.e. 300,000 km per second. These signals reach the earth’s surface at different times as the satellites are positioned in different locations to each other. A mobile phone picks up the three signals and can calculate the location from the time.

But how does this precise timing help mobile banking?

The precise time is of crucial importance for the modern financial system as several billion items of financial information are transmitted and transactions executed per hour around the world. This starts with the parking meter that we use our credit card to pay for and extends to the billions that are transferred between banks.

This system needs to know the exact time at which information traveling at close to the speed of light is sent.

Why must the time be exact to a fraction of a second?

Let me illustrate by giving an example: Suppose the clock of a market participant shows a certain time when he transfers money. The recipient transfers it back. However, his watch is slower and is showing a later time. If he returns the money immediately, it will be returned before the sender has even sent it according to his clock. So the recipient can use this time to work with the money. The sender gets it back but in the meantime the recipient has been able to work with it.

Obviously, the system can’t work like this because a given amount of money cannot be in two different accounts at the same time. It must be balanced. The system won’t work regardless of whether only one euro or 300 billion euros more than in the accounts is in circulation at any given time.

The modern financial system requires a single time and each transaction must have its own time tag. Given the billions of transactions that are transacted each day, this is crucial.

As well as this, the satellite signals are used to check the plausibility of transactions. In addition to the time stamp, a transaction generally also has a place stamp. This provides added security in mobile banking as it ascertains the plausibility of the user’s location. If a credit card is being used in two different places at the same time, this is generally a sign that something is amiss, in which case the bank can take the necessary steps. This check prevents possible fraud.


Galileo brochure: The European satellite navigation system


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What consequences does this have for other parts of the banking sector?

Whereas high-frequency trading is completed in fractions of a second, a normal transfer may take up to a few days. This is now to change. From 2018, bank customers will be able to have transfers completed within a few seconds. With these instant payments, banks will credit the proceeds within 10-15 seconds and thus almost immediately. This new service will be available for amounts of up to EUR 15,000.

It is being offered as it is technically possible and there is no reason for artificial delays.

Will Galileo result in any changes to the system?

The system must be reliable, 100% available and secure. This is the case with GPS all around the world. It works well and is stable and the US military relies on it.

However, civilian use of the system can in principle be restricted at any time in extreme crisis situations and the system reserved solely for use by the US military, for which it was originally developed. That said, such a scenario is extremely unlikely as the US economy, civil aviation and power stations – basically the entire public infrastructure – is dependent on it. In a few years’ time, traffic light systems will also be satellite-controlled to create “green waves” for example. This is because GPS-based technology is far cheaper than other systems.

As satellite systems will be used more and more in the future, it is crucial for them to operate reliably. This is why, Galileo, which is an independent European project, is a very welcome development.

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This all sounds like a great deal of progress. Are there also any difficulties?

Generally speaking, there is always a fundamental risk of a satellite navigation system being hacked. There is no such thing as complete security. And of course there are also natural risks. Navigation systems are exposed to solar storms for example. Whenever there is an eruption on the sun, we experience this on the earth eight minutes later as this is how long it takes for the light to reach us. This is followed roughly one day later by the electromagnetic wave made up of ionized particles. They repeatedly disrupt electricity grids in the far north. Canada, for example, repeatedly experiences power outages due to sun winds.

Electromagnetic radiation is also a risk to satellites and may disrupt them. This is why satellites must always be well protected against this ionizing radiation.



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However, they are also affected indirectly: Among other things, electromagnetic radiation also causes the Northern Lights, which arise when the earth’s atmosphere becomes electrically charged. This also results in a variation in the speed of light. Accordingly, solar winds may corrupt the signals received on the surface of the earth. If you can quantify the influence on the atmosphere, you can use corrective signals to eliminate the effects. These are borderline areas on which we will be continuing to work in the future.


So, satellites are crucial for our modern life?

This research work is very important as the modern global financial system and the networking of the financial markets in Frankfurt, London or Tokyo us dependent on precise timing in view of the gigantic number of transactions. Experts estimate that the impact that satellite navigation has on the European economy is worth several hundred billion of euros.

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